Congress of the Anited States House of Representatives Washington, BE 20515 February 23, 2010 The Honorable John M. Spratt Chairman Committee on the Budget U.S. House of Representatives 207 Cannon House Office Building Washington, DC 20515 Dear Cha ‘man Spratt: We write to respectfully urge your committee not to assume President Obama's oil and gas tax increases recently submitted to Congress within the Fiscal Year 2011 Budget Resolution. Atthis critical juncture in American history, we must make tough choices to improve our economic, energy and national security. One choice, however, is clear: continued domestic production of natural gas and oil will help address many of the challenges we face today, including create jobs for a struggling economy, provide millions of dollars to federal and state governments from taxes and royalties, dectease our reliance on foreign sources of energy, and meet our clean energy goals by reducing greenhouse gas emissions, the President Obama and the Democratic Congress have made improving our economy and job creation our top priority. America’s natural gas and oil industry can deliver new, high-wage jobs to many regions of the country, including areas not traditionally associated with oil and natural gas production. According to the Bureau of Labor Statistics at the Department of Labor, energy industry jobs nationwide grew by almost 9% while upstream industry jobs jumped 64% from 2002-2008. If we continue to promote the responsible production of these resources, we can see similar increases throughout the country on top of the over nine million jobs already supported by the industry. In addition, America’s independent producers - which develop over 80% of U.S. natural gas and nearly 70% of U.S. oil — are small businesses which President Obama Jauded in his State of the Union address as a key component to growing our economy. ‘These companies historically have invested more than 150% of their cash flows back in to projects in America, strengthening economic impact and job growth,Unfortunately, the tax repeals proposed in President Obama’s budget would disproportionately penalize America’s independent producers and will serve only to discourage companies from investing in additional projects and jobs, such as in the new shale gas plays across the nation. Below is a brief description of these critical provisions: Intangible Drilling and Development Costs (IDCs) ~ IDC tax treatment is designed to attract capital to this high-risk business and has been part of the tax code since 1913. Percentage Depletion ~ Percentage depletion provides capital primarily for smaller independents, is only available for American production, and has been part of the tax code since 1926, Passive Loss Exception for Working Interests in Oil and Gas Properties ~ Part of the tax code since 1986, this provision provides oil and natural gas small business, owners a way to diversify their risk. Geological and Geophysical (G&G) Amortization ~ Early recovery of G&G costs allows for more investment in finding new resources. Extending the amortization period would remove capital from efforts to find and develop new American production. Marginal Well Tax Credit ~ Created as a safety net for marginal wells during periods of low pricing, these wells provide 20% of American oil and 12% of American natural gas. Removal of this provision adds zero revenue to the President's budget. Enhanced Oil Recovery (EOR) Tax Credit ~ Designed to encourage production using costly technologies, such as the use of carbon dioxide as an injectant to increase oil production. Carbon dioxide EOR allows for reaching multiple goals of carbon capture and sequestration and improving American energy production. Manufacturing Tax Deduction ~ All U.S. manufacturers benefitted from this deduction until the natural gas and oil industry was restricted to a six percent deduction in 2008. Complete removal would strip capital away from companies to reinvest in new production, America needs an energy policy that recognizes the roles that all forms of energy can play ~ conventional and renewable -- to rebuild our struggling economy, increase U.S. energy supplies and move towards a cleaner energy future. We look forward to working with you to develop a budget resolution that supports these goals. GENE GREEN Member of Congress Mefnber of CongressMi é ‘Member of Congress d a nber of Congress Od Gunn Merhber of Congress Kaa bd LB OTD Me Lb Povepom Member of Congress Member of Congress Member Af Congress ‘Member of Congress| Meinber of Congress 1/4 ff, mber of Congress ‘Member of Congress ; Ve &. CEddas “Member of Congress CPlmee Member, [Member Of Congress Member ae Li Mth, Cte ‘Congress Member of CongressMember of Congress Ce: The Honorable Ciro Rodriguez The Honorable Charlie Gonzalez The Honorable Henry Cuellar ‘The Honorable Chet Edwards ‘The Honorable Silvestre Reyes ‘The Honorable Al Green ‘The Honorable Solomon Ortiz, The Honorable Ruben Hinojosa ‘The Honorable Dan Boren The Honorable Mike Ross The Honorable Travis Childers ‘The Honorable John Salazar ‘The Honorable Sheila Jackson Lee ‘The Honorable Michael McMahon ‘The Honorable Jim Costa ‘The Honorable Earl Pomeroy The Honorable Jim Matheson Member of Congress